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Vanand Meliksetian

Vanand Meliksetian

Vanand Meliksetian has extended experience working in the energy sector. His involvement with the fossil fuel industry as well as renewables makes him an allrounder…

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Mediterranean Tensions Flare Up As Israel Rehabilitates Pipeline

The Arab Spring was the start of an ideological conflict between Turkey and the wealthy Arab Gulf nations. Turkish assertiveness is strengthened by an expanding economy and a brand of Islamic ideology which is shared with the likes of the banned Muslim Brotherhood. Israel, on the other hand, stands to benefit from this conflict by strengthening its relations with European and Arab neighbors. The trans-Israel Eilat-Ashkelon pipeline could be a massive asset that would cement existing ties.

Tensions between Turkey and the Gulf nations grew after Ankara expressed its strong support for Morsi and the Muslim Brotherhood in Egypt after Mubarak was overthrown. The monarchies in the Gulf view Islamic democracy as an existential threat to their style of rule. The imprisonment of Morsi, the civil war in Libya, and the discovery of gas deposits in the Eastern Mediterranean have worked in favor of Israel and its strategic value. The recent normalization of relations between Israel, the UAE, and Bahrein could finalize an anti-Turkey coalition that will define politics in the region for decades.

Already an impressive coalition consisting of France, Greece, Cyprus, Egypt, the UAE, and Israel is confronting Turkey’s saber-rattling. Besides security cooperation, these countries are also working on strengthening political and economic ties. On 16 January the East Med Gas Forum was established in Cairo with the members being Egypt, Cyprus, Greece, Israel, Italy, Jordan, and the Palestinian Authority. Also, Israel, Greece, and Cyprus are working on the EastMed pipeline to connect customers in Europe with gas deposits in the Levantine Basin.

The latest initiative in the ideological battle against Turkey is the rehabilitation of Israel's Eilat-Ashkelon pipeline. The normalization of ties with two Gulf countries will enable the reuse of the pipeline as a conduit of oil that further deprives Turkey of its role as an energy hub. Related: Trump Administration Shocks Oil Industry With Biofuel Waiver Decision

The infrastructure was completed in 1968 with the support of Israel and the pro-western shah of Iran. However, the Islamic Revolution of 1979 cut of the oil supplies from Iran that traversed the country. The strategic value of Israel as an essential linchpin of Western energy security diminished overnight. 

In 2003, however, adjustments to the pipeline enabled reverse flow to allow the oil to run both ways. The former Soviet states Russia, Azerbaijan, and Kazakhstan willingly made use of the pipeline for their oil to travel from the Black Sea area to Asia.

The coalition is pushing for the Eilat-Ashkelon pipeline to play a bigger role which will benefit the energy security of customers and the strategic goals of Israel. The re-purposing of the pipeline to carry oil from the Persian Gulf to Europe would diminish Turkey’s role. 

The pipeline's owner, Europe Asia Pipeline Co. (EAPC), expects to capture somewhere between 12 and 17 percent of the oil trade transiting through the Suez. It affects Egypt's ability to generate income as a significant share of the state's coffers comes from transit fees. According to a confidential Israeli government source of Asia Times, "while better relations with the UAE and the other Gulf States are important, our peace with Egypt is absolutely essential for maintaining regional stability. Without it, the security position of the country will devolve significantly. Therefore, we should coordinate with the Egyptians rather than attempt to harm their position unilaterally."

However, EAPC’s pipeline could be an addition to the Suez Canal. Despite the recent expansion of the Suez, the largest supertankers are still not able to traverse the Egyptian desert. The pipeline could change that when supertankers can pick up cargoes in the Red Sea or the Mediterranean.

Until now EAPC has operated the pipeline in relative secrecy due to two reasons. First, certain Arab customers would like to keep their commercial deals secret due to Israel's reputation in the Islamic world. Second, Iran provided some of the funds to construct the pipeline before the Islamic Revolution in the sixties. Making public the companies’ operations and earnings could strengthen Tehran’s case in international arbitration cases. In 2015 a Swiss court ordered Israel to pay Iran compensation worth $1.1 billion.

Despite the challenges, political backing from the Israeli government, the conducive strategic environment, and already available infrastructure will likely lead to increased use of the pipeline.

By Vanand Meliksetian for Oilprice.com

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  • Mamdouh Salameh on September 16 2020 said:
    With Russia accounting for 40% of all natural gas supplies to the European Union (EU) and with the Turk Stream gas pipeline bringing Russian gas supplies to Turkey and the EU under the Black Sea and also the Southern Gas Corridor (SGC) bringing Caspian gas from Azerbaijan to Turkey and then to the EU via the Trans Adriatic Pipeline (TAP), Turkey’s position as the energy hub of Europe is unassailable.

    Moreover, Turkey opposes the proposed EastMed gas pipeline which will transport Cypriot and Israeli gas supplies under the Mediterranean to the EU via the Greek mainland because it undermines its position as the energy hub of Europe. This pipeline will most probably never see the light of day because of Turkey’s opposition, the excessive costs of the pipeline and the small volumes of gas it will be bringing to the EU.

    Therefore, neither Turkey’s position as an energy hub nor Russia’s piped gas and oil supplies to the EU are threatened in any way by the rehabilitation of Israel's Eilat-Ashkelon pipeline (EAP).

    While the EAP could enable Saudi oil shipments to by-pass both the Straits of the Hormuz and Bab Al-Mandeb and the Suez Canal for instance, it competes with both the Suez Canal and the SUMED pipeline, which bypasses the canal and connects the Mediterranean to the Red Sea. This will certainly benefit Israel economically in terms of transit revenue and strategically, but it will reduce Egypt’s revenue from the Suez Canal and deprive it of an estimated 12%-17% of the oil trade transiting through the Suez thus harming its economy and its relations with both Saudi Arabia and UAE. Still, for the largest supertankers that are unable to pass through the Suez Canal, the EAP could be very useful as they can pick up cargoes in the Red Sea or the Mediterranean.

    However, there is a glimmer of hope that Turkey’s recent huge Black Sea gas discovery could lead to a de-escalation of tensions in the Eastern Mediterranean.

    President Erdogan coming under international pressure and facing economic difficulties internally may choose as a gesture of goodwill to freeze exploratory activities in the disputed waters around Cyprus and Greece using the Black Sea discovery to entice warring parties to come to the negotiation table.

    Right now, the chances for such a shift are slim. Cross-party support for Turkey's muscular posture vis-a-vis Greece and its allies runs strong. More assertive diplomacy appears to be paying off, whether in Syria, Libya or in the Eastern Mediterranean. Last but not least, Turkish policymakers do not see a linkage between the two issues. But keeping all options on the table, including de-escalation, would be a prudent choice for Ankara. The alternative could be a military conflict involving NATO and also European and Eastern Mediterranean countries.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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